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HMRC internal manual

International Manual

HM Revenue & Customs
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Controlled Foreign Companies: The CFC Charge Gateway Chapter 3 - Determining which (if any) of Chapters 4 to 8 apply: Does Chapter 4 apply?: HMRC Governance

If, having read this guidance and the guidance for Chapter 4 (see INTM200000), you believe that arrangements, in relation to UK activity, justify a challenge to a taxpayer’s view on whether, or the extent to which, a CFC’s profits pass through the gateway to be charged as Chapter 4 profits, you must contact the Foreign Profits Team in CTIS before you proceed with an enquiry.

It is expected that the application of the transfer pricing legislation and the question of whether any UK activity is carried out by a permanent establishment of the CFC will have been considered whilst considering whether a Chapter 4 challenge is appropriate.

Prior to contacting the Foreign Profits Team, you should have considered, at least, the following points:

  • What are the assets and risks in the CFC and the nature of the UK activity in relation to them;
  • why you consider that UK activity is under-rewarded;
  • why a transfer pricing adjustment will not remedy any under-reward to the UK;
  • why the UK activity does not lead to the CFC being treated as trading through a UK PE;
  • why you consider that none of the TIOPA10/S371CA conditions are met;
  • why the exclusions in Chapter 4 (see INTM200600) do not apply;
  • the estimated tax at risk from the arrangements that are in place between the UK company or companies and the CFC.